EconSouth (First Quarter 2008)
Q & A
"You Have a New Wave of Economic Developers"
An Interview With Neal Wade of the Alabama Development Office
The state of Alabama has been on an economic development roll. German steelmaker Thyssen-Krupp broke ground in November on a $3.7 billion plant north of Mobile that will employ 2,700 people at its scheduled 2010 opening. In July 2007, National Steel Car announced plans to build a rail car factory in Muscle Shoals that will hire 1,800. Hyundai in 2005 opened an assembly operation in Montgomery, the state's third automobile plant. And in February, the U.S. Air Force awarded a contract to build a new tanker airplane to a consortium that plans to locate an assembly plant in Mobile. Neal Wade, director of the Alabama Development Office, the state's economic development agency, is directly involved in the state's quest for new corporate citizens.
EconSouth: In 1993 Alabama awarded Mercedes incentives totaling about $250 million, a huge number that raised the bar for such deals. Critics said it was too much for a relatively small Southern state to give to lure a big corporation. That deal happened before you joined the state, but did Alabama give up too much to get Mercedes?
Neal Wade: The incentive package was aggressive but responsible. The plant has tripled in size since then, and we now have Honda and Hyundai. Mercedes would say two things: The workforce and training package put together was the key to selecting Alabama. We've focused on that. We are going to make sure we have the workforce necessary to build the quality product they want built. Second—we've learned this throughout the economic development process—the partnership you establish between the state, the business community, and a particular company is critical. These companies want to believe that you're not going to love them and leave them, that you're going to stay with them, work with them, and help them grow. ThyssenKrupp made exactly that point in their announcement.
ES: What are other key elements in Alabama's economic development strategy?
Wade: Partnerships, as we just discussed, is a big one. And Gov. [Bob] Riley is a key. We basically term him the chief economic developer for the state. Companies want to know the governor is going to be there to help them. His scheduler told me [recently] that he's going to Mobile to see the president of ThyssenKrupp while he's there. He does that all the time. I think that's part of what we have figured out has to happen—that involvement at the top government level throughout the process.
ES: Just how significant are financial incentives in industry recruitment today?
Wade: With some projects, it is the most important thing. [Companies from] some countries, some cultures, focus on it more than other cultures do. It does become a very, very important part of the process. Sometimes site consultants use it as more of a factor than maybe it ought to be. Sometimes in the smaller projects, discretionary incentives are more important than in some of the larger projects. But the site [of a proposed facility] is the first issue to be solved. You get sites, then you start breaking it down in terms of workforce, education, quality of life, incentive package, and local leadership. In the case of ThyssenKrupp, had we not worked out the logistics of getting steel slabs from Brazil to the site up the [Tombigbee] river, we couldn't have played the game at all.
ES: How do you determine how much is the right amount in incentives?
Wade: We run a cost-benefit analysis for every project for cash [incentives]. Statutory incentives are on the books: You meet the criteria, crunch the numbers, it's automatic. When we get into putting discretionary funds into a project at the local and state level, the cost-benefit comes in. With Gov. Riley, we started doing analysis that shows—at a particular number of jobs, average wage, investment, etc.—if we put X dollars into the project, we'll start seeing a positive return to the state in year three, four, or five. It's a guide. We go beyond that sometimes, depending on whether there are intangible reasons why we want a particular company to come.
ES: How has economic development changed most over the years?
Wade: It used to be wine 'em and dine 'em. Now it is a business approach. It is numbers. Companies are very thorough in due diligence, especially the large companies that are making multibillion-dollar decisions. We make sure we get them the answers they need. I think that's changed more on our side than on the companies' side. Economic developers at the state and local level would play golf, drink, go to dinner, stay out late. Now, you have a new wave of economic developers who clearly understand it is a numbers game.
ES: What do companies generally want in a workforce?
Wade: National Steel Car is hiring 1,800 people in Muscle Shoals. Fifteen hundred will be welders. We've got to show them that through the two-year college system, the center to be built there, and elsewhere how we're going to provide 1,500 welders. You break down what they'll hire and say, "This is how we're going to solve those issues and provide the workers." We bring [the state's industrial training program] in to work with us, take the company's workforce needs—wage level, timing, etc.—and they put together a program that will screen and provide candidates, deliver them the candidates, and then train those candidates based on the criteria that the company sets up. What we do in essence is a partnership with our industrial clients.
This interview was conducted by staff writer Charles Davidson.